THE DEPARTMENT of Finance (DoF) wants to make public the names of businesses that avail tax incentives.
Apart from pushing the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill that will cut corporate income tax rates and scrap redundant tax incentives that have been costing the government hundreds of billions of pesos in foregone revenues yearly, the DoF is also seeking the expansion of Republic Act No. 10708 or the Tax Incentives Management and Transparency Act (TIMTA) of 2015 by publishing the names of businesses that enjoy tax perks.
“This is what we mean by being transparent,” a DoF statement on Thursday quoted Finance Undersecretary Karl Kendrick T. Chua as saying.
“We propose that the names of firms receiving incentives be made public, including the amount of their incentives and contributions to society.”
The department explained that “when the government gives an incentive to one group, another group pays for it in the form of higher taxes, which should have the right to know who is benefiting from its hard-earned money.”
Senate Bill No. 1701, which was endorsed by the DoF and filed in February, complements the TRABAHO bill as it expands the coverage of TIMTA by putting in place a reportorial system for the tax incentives granted to registered investments.
The bill also requires other government agencies like the Cooperative Development Authority to provide information on entities that avail of non-investment related tax incentives.
Registered individuals and other entities must also report to the Fiscal Incentives Review Board their exemptions from value-added tax and local levies.
“We recognize the value of incentives as a key component of a country’s policy tool kit,” Mr. Chua said.
“We assert, however, that incentives should not be given indiscriminately at the expense of building up our more powerful attractions: first, a skilled and hardworking talent pool that needs sufficient human capital investments, second, an ambitious infrastructure development program that requires fiscal commitment, and third, a sizable SME (small-and-medium enterprises) community that deserves to be treated fairly.”
COUNTING THE COST
The Finance department has estimated that, in 2016, about 3,102 companies paid special corporate income tax (CIT) rates of 6-13% for over 15 years, instead of the regular 30% levy.
It said that these large firms have been profitable enough that they no longer need to enjoy fiscal incentives that are granted by the country’s 14 investment promotion agencies.
At the same time, 90,000 small- and medium-scale enterprises that employ 2.5 million workers in the country pay the regular 30% CIT rate, which is the highest in Asia. The TRABAHO bill seeks to reduce this rate gradually to 20% in a 10-year period.
The department has said that the government lost some P178.56 billion in potential revenues to tax incentives in 2016. In 2015, revenues foregone due to such perks amounted to P301 billion.
The government of President Rodrigo R. Duterte has embarked on a comprehensive reform effort to shift the tax burden on those that can afford it, while generating additional revenues to help finance the administration’s infrastructure development campaign. — Elijah Joseph C. Tubayan